Tensions between banks and tech companies in the UK are escalating over who should bear the financial burden of online fraud compensation.
Beginning October 7, UK banks are required to compensate victims of authorized push payment (APP) fraud, with a maximum payout of £85,000 per victim. This fraud type involves criminals tricking individuals into sending money, often by impersonating legitimate businesses or services. The financial industry, already under pressure, is questioning whether tech firms are doing enough to help prevent and share the responsibility of these fraud losses.
Revolut Accuses Meta of Failing to Act on Fraud
On Thursday, Revolut, a London-based digital bank, openly criticized Meta for not taking adequate measures to combat fraud on a global scale. Woody Malouf, Revolut’s head of financial crime, argued that by avoiding responsibility for reimbursing victims, tech platforms like Meta lack the incentive to reduce online scams.
Meta recently announced a partnership with UK banks NatWest and Metro Bank to exchange intelligence on fraud activity occurring on its platforms. However, the digital banking sector believes this is not enough.
The debate over fraud liability is not new. Over the years, the rise in online fraud has placed increasing financial strain on banks, with digital platforms acting as a fertile ground for scams. In June, the Labour Party reportedly proposed legislation that would force technology companies to compensate victims of fraud originating on their platforms. However, the government has not confirmed whether this proposal will move forward.
Following an industry backlash, the Payment Systems Regulator (PSR) lowered its initially proposed compensation cap from £415,000 to the current £85,000, as financial institutions, represented by groups like the Payments Association, deemed the higher amount unsustainable. Despite this concession, banks remain concerned about the ongoing financial impact of fraud compensation, especially if tech companies continue to avoid direct liability.
Banks and Regulators Push for Tech Firms to Share Fraud Costs
Revolut’s criticism of Meta reflects a broader frustration within the banking sector. According to industry figures, social media platforms are often exploited by fraudsters, and banks believe more transparency and cooperation from tech firms are necessary. Regulatory authorities, too, have emphasized the importance of collaboration. At a finance industry event in March 2023, regulators urged social media companies to increase efforts to combat fraud and share data with banks.
Meta, on the other hand, rejects claims that it should be financially responsible for fraud victims. The company asserts that banks are shifting liability to other industries rather than addressing the root causes of fraud.
In a written statement to a UK parliamentary committee, Meta emphasized that it facilitates cross-industry collaboration through initiatives like the Fraud Intelligence Reciprocal Exchange (FIRE), which allows banks to share fraud-related data. Meta has called for further government support to encourage such collaborations between sectors, stressing that fraud prevention requires a united effort across industries.
Featured Image courtesy of DADO RUVIC/REUTERS
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